Turkey: Central Bank keeps rates unchanged in March
March 6, 2019
At its monetary policy meeting on 6 March, the Central Bank of the Republic of Turkey (CBRT) left the one-week repo rate unchanged at 24.00% for the fourth consecutive meeting.
The Bank’s decision to keep rates at their current high level was motivated by a desire to support the lira and ensure that price pressures continue to ebb. Although inflation has dipped from the peak of over 25% reached in October, it remains elevated and, according to the Bank, “risks on price stability continue to prevail”. As such, any premature monetary loosening would have risked depressing the lira and leading to a resurgence in inflation. On the other hand, in light of subdued domestic demand and the gradual improvement in inflation metrics, the Bank saw no need for further tightening.
In its communiqué, the Bank’s tone was unchanged from its previous meeting in January. As such, the CBRT reiterated its commitment to a tight monetary stance until the “inflation outlook displays a significant improvement”, taking into account fiscal policy, inflation expectations and the lagged impact of previous rate hikes. It also left the door open to future rate hikes if required.
Turkey Interest Rate Forecast
Our panelists see the CBRT loosening its stance later this year as inflation drops off. They see the one-week repo rate ending 2019 at 19.14% and 2020 at 15.05%.
Author: Oliver Reynolds, Economist